By Charles Moore, NextGen | October 26, 2018
Charles Moore is Managing Partner at NextGen Global Executive Search
Whether all Fintech should be considered disruptive innovation or not is a matter for debate according to well-educated writers at The Harvard Business review. But it doesn’t take an Ivy League education to recognize that many of the new FinTech technological innovations in the finance sector are sending tremors across the industry. Old-fashioned practices like going to the bank are being superseded by online transactions using hand-held devices.
There is nothing narrow in the definition of Fintech. The term can apply to any technology solution used to deliver financial services. According to Investopedia, it's originally thought of as “FinTech technological innovations applied to the back-end of established consumer and trade financial institutions;” now the word is used to describe any technological innovation in the financial industry.
A Broad Impact
FinTech has been around for a long time, working in the background to support banks, trading companies, insurers, and other financial institutions. Now FinTech technological innovations include platforms that manage end-to-end processes like the interaction of users on their smartphones. The aim is to use technology creatively to make life better.
A simple example is online mobile banking. Most banks now allow customers to log in to their accounts through a secure website or app. This capability alone has changed the way people do their banking. Online banking means customers can check balances, transfer money, or pay bills without ever stepping foot into a bank lobby. And the ubiquity of credit or debit transactions in stores eliminates the need to withdraw cash at the bank or an ATM.
Past Present and Future FinTech Technological Innovations
We’ve been using Fintech for a while now. An article on “The Evolution of Fintech” in Forbes says that Fintech is “a very broad sector with a long history”. That history includes credit cards, ATM machines, bank mainframes, e-commerce, trade processing, and data analysis. We can even go back to Friday, October 15, 1954, when history's first automated payroll checks were printed by the UNIVAC machine, as I described in "Milestones in Digital Computing".
Today, Fintech is apparent in technologies that we use every day. In an article about the evolution of Fintech, ComputerWorld gives the examples PayPal, Apple Pay, Google Wallet, Charles Schwab, TD Ameritrade and Fidelity Investments. But that just scratches the surface. For a bigger list, take a look at "The Fintech 50: The Complete List 2016". These financial technologies may not currently be on your radar, but maybe they should be.
Fintech expert Alex Rampell discusses “The Future of Money: Banking on Fintech” in a YouTube video. He says that millennials don’t want to talk on the phone or visit bank locations. They are used to doing everything on their smartphones. Rampell says that services such as core banking, new financial products, insurance, and investing are being addressed with Fintech solutions. The four main debt categories, credit card, mortgage, auto loans, and student loans, will also have apps that are widely adopted.
Other predictions about the future of FinTech technological innovations and banking, such as this video from Avonade and another from Newgen software, might make you wonder if the technology might become a bit too intrusive. But those things will be worked out in society and in the marketplace. A special report from the Financial Times on the future of Fintech might be a better place to start.
Another way to look at it is to say that the future is not that far off. Using the smartphones and other computing devices that we already possess, financial service providers can easily make their offerings available through a simple app. And they are already doing that. The question remains whether we are prepared to entrust our financial transactions to them.
A Fintech Primer
We said that Fintech has a broad definition. Every technology has its own language with its own special terms. We won’t cover them all here because the work has already been done for us. CNBC has done a fine job in defining Fintech terms in their article "Everything you've always wanted to know about Fintech". Some of the terms covered are:
- Cryptocurrency - a decentralized digital currency which uses encryption
- Bitcoin - a peer-to-peer version of electronic cash
- Blockchain - a form of distributed ledger technology (DLT)
- Ethereum - another type of blockchain network
- Regulatory technology (regtech) - technology which helps firms working in the financial services industry meet financial compliance rules.
And you might be wondering about the spelling of the word we have been describing. I’ve seen Fintech, FinTech, or fintech. I’m not sure that there is any accepted spelling as of yet.
Conclusion of FinTech Technological Innovations
Some people may wonder when we will start using Fintech, but the answer is that we already are. The financial technology that we have been using for years -- including credit cards and ATM machines -- may not have been called Fintech, but the definition applies. You can probably think of many others in your daily experience. As with any technology, there is more to it than creating the ability to do something. It all comes down to which Fintech apps are widely adopted in the market place, and how financially successful those FinTech technological innovations and solutions become via artificial intelligence and predictive analytics.